Sep 14, 2013, 05.31 PM IST
The personal care segment within fast moving consumer goods (FMCG) sector has seen the most slowdown although sales in high-end portfolio products remain robust, says Piyush Mathur, President, Nielsen India Region
Even today in a slow down like this if one looks at high end cars there is a steady sale that is already happening.
Nielsen India Region
Reeling under the current economic turmoil, Piyush Mathur, President, Nielsen India Region says consumers are really trying to balance their income versus expenditure. He says it seems they are trying to push back their discretionary purchases.
Also read: Car sales up 15.4% in August: SIAM
The personal care segment within fast moving consumer goods (FMCG) sector has seen the most slowdown although sales in high-end portfolio products remain robust. "The real stand out despite all the slow down is rural India and middle India. They are relatively growing faster and in some ways are the bellwethers for the FMCG growth during the slow down," he adds.
The volume growth for the sector has come down to 2.5-3 percent compared to 8-10 percent growth seen last year.
Below is the verbatim transcript if his interview on CNBC-TV18
Q: That the consumption story is breaking down was evident in some numbers, has it improved at all because of the monsoons?
A: About four quarters ago India was on top of the world. We were high on consumer confidence Index something the Nielsen tracks in 58 countries, but we have seen that in the last couple of quarters we are down to number three slot, after Indonesia and Philippines.
I think it is a double whammy for the Indian consumers. On one side the economy is slowing down. You see the youth not getting relevant jobs. On the other side, one sees the consumer price index (CPI) inflation double digit in urban India. So, consumers are really trying to balance their expenditure and looking at their income they manage their monthly balance sheet. For them it is a lot of about where do I cut. They have actually postponed a lot of their consumption habits. Automotive sales have gone down; they are delaying their durable purchases.
Within the FMCG sector we see that personal care is really slowing down. Food consumption is still up. The real stand out despite all the slow down is rural India and middle India, which is really 1 to 10 lakh towns. So, they are relatively growing faster and in some ways are the bellwethers for the FMCG growth during the slow down.
Q: If you had to give us some numbers what could the growth look like on an average for many of these companies. You think it will be low single digit volume growth that we will have to deal with or will it still be in that 8-10 percent volume growth range for FY14?
A: First, we have to look at where are we today. In the last couple of quarters we have seen volume growth across FMCG sector has come down to 2.5-3 percent compared to last year’s 8-10 percent range. So from sentiment point of view it does not look like in the next quarter or so, volume growth is going to go up but 2014 things can change.
Q: Do you notice that that will not impact the high income groups or the discretionary items say for instance a Titan product. I am not asking you for specific names but is it that the category will be insulated from this?
A: I think there is a two track economy if were to call it. There is that premium segment that seems to do well. Even today in a slow down like this if one looks at high end cars there is a steady sale that is already happening.
The real story is the middle India story where the consumers aspiring for more. They want to live well, eat well. One is also seeing home loans do well in middle India despite the overall market is down. One sees the aspirations of middle India, Indians going up so, especially in the Rs 25 to 40 lakh property price range the home loans are really going up.
Q: We had a real estate analyst couple of days back who was saying that real estate prices are not going down because IT sector is still doing well and we just had a lot of evidence that it could do better than most people thought will that change your numbers for consumption?
A: IT sector is not really the consumption story. The consumption is really about buying different goods.
Q: In the sense of young men who get jobs?
A: The way we look at it is that if economy is growing below 7 percent there will be millions of Indians that will not get jobs as they enter into the work force so it is going to be a tough scenario at 4.5 percent.
Markets face resistance; Nifty likely to correct soon
After expansion comes contraction - this is the theme which the stock markets have begun to work on. This letter has been upbeat on the market. We still are, when it comes to the long term. The short term scenario may be different. For short term traders the strategy should be to take swing trades lasting one or two days, only on extremes.
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